The Local Economic and Welfare Consequences of Hydraulic Fracturing
124 Pages Posted: 21 Dec 2016 Last revised: 25 Jul 2018
Date Written: July 15, 2018
Exploiting geological variation and timing in the initiation of hydraulic fracturing, we find that fracing leads to sharp increases in oil and gas recovery and improvements in a wide set of economic indicators. There is also evidence of deterioration in local amenities, which may include increases in crime, noise, traffic and declines in health. Using a Rosen-Roback-style spatial equilibrium model to infer the net welfare impacts, we estimate that willingness-to-pay (WTP) for allowing fracing equals about $2,400 per household annually (5.2% of household income), although WTP is heterogeneous, ranging from more than $10,000 to roughly zero across ten shale regions.
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